# Current Ratio Calculator

This is an online current ratio calculator that helps you find the value of the current ratio, which is used to measure the liquidity of a company.

The current ratio is a liquidity ratio used across the industry to assess a company’s short-term obligations or those due within one year. In other words, it reflects a company’s ability to generate enough cash to pay off all its debts once they become due. It’s used globally as a way to measure the overall financial health of a company.

## Calculating the current ratio

To calculate the ratio, analysts compare a company’s current assets to its current liabilities.

• Current assets listed on a company’s balance sheet include cash, accounts receivable, inventory and other assets that are expected to be liquidated or turned into cash in less than one year.
• Current liabilities include accounts payable, wages, taxes payable, and the current portion of long-term debt.

The formula to calculate the current ratio is as follows:

`Current Ratio = Current Liabilities / Current Assets`

## ​Interpretation

• If a company with a current ratio that is lower than the industry average may indicate a higher risk of distress or default.
• If a company has a very high current ratio compared to their peer group, it indicates that management may not be using their assets efficiently.

## Current Ratio Example

Balanced sheet item Company A Company B
Cash and equivalents \$10,000 \$45,000
Inventory \$80,000 \$15.000
Accounts receivable \$20,000 \$50,000
Total current assets \$110,000 \$110,000
Accounts payable \$50,000 \$20,000
Short-term notes payable \$55,000 \$75,000
Wages payable \$20,000 \$30,000
Total current liabilities \$125,000 \$125,000
Current ratio .88 .88

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